Looking to pluck as much outside private banking talent as possible, Citigroup Inc.'s new private banking chief said Monday that the company plans to acquire "at least one or two" small investment advisory firms in the next few months.
In doing so, Citigroup would join a growing number of banking companies that have bought up or are at least considering the purchase of investment boutiques.
"We're looking at a number of the smaller advisory firms right now, where we can pick up some significant expertise," said Peter Scaturro, chief executive officer of Citi's global private bank. "Some of these investment advisory firms are very focused, very exclusive, and have some real talented people."
But the company is not waiting for an acquisition to expand. So far this year Citigroup has added approximately 85 private bankers and product specialists, Mr. Scaturro said. That increased its staff by 25% and is substantially more than it had hired in any previous year, he said.
The company has about 450 bankers in 31 countries, Mr. Scaturro said, but that's not nearly enough.
"If I could find another 100 world-class bankers, I would hire them tomorrow," he said. "I think it's difficult to find private bankers that are real financial engineers that understand taxes, that understand structured products, that understand capital markets, and how the markets all fit together. We are clearly resource-constrained, as opposed to opportunity-constrained."
The additional resources are part of Citi's master plan to raise its profile in this country and abroad. Here the key growth areas being targeted are California and the Southeast, Mr. Scaturro said. Abroad the bank is concentrating on the onshore market in Latin America; on building on its stronghold in Singapore and Hong Kong to expand to other areas of Asia; and on Europe.
Mr. Scaturro, 40, is also relative newcomer. He joined Citigroup from Bankers Trust Co. last fall and ran Citi's U.S. private banking operations until being named interim chief of the global private bank in April, succeeding Todd Thomson, who was promoted to chief financial officer.
Mr. Scaturro was designated permanent CEO of the private banking operations this month. On Monday, Mr. Scaturro said he had promoted Geoffrey von Kuhn to head U.S. private banking; he had been hired from Bank One Corp. a few months ago to run operations on the East Coast.
The hiring of Mr. von Kuhn, who comes from a capital markets and asset management background, and other changes were designed to strengthen the private bank in these areas, Mr. Scaturro said. Such strengths are crucial as the private bank, which has historically focused more on the lending side of the business within the U.S., looks to bolster its asset management services, he said.
Mr. Scaturro has been made responsible for better tapping the vast private banking opportunities within Salomon Smith Barney, Citigroup's investment banking and retail brokerage arm.
The bank, which has more than 20,000 private banking clients, with $149 billion in assets under management, said early this month that it had generated core private banking income of $160 million so far this year, 27% more than the same period of 1999.
Citigroup, which has pushed harder into private banking in the last couple of years, intends to double its private banking profitability within the three or four years, Mr. Scaturro said. The bank offers real estate, art advisory, lending, and investment advisory services.
"The ability of a small firm to invest in technology in order to keep up with what's happening nowadays - to be in every market around the world - I just don't think is feasible," he said. "That's why business for a firm like us has been so good in the last year or two.
In addition to seeking acquisitions, Mr. Scaturro, who was described by chairman and chief executive Sanford I. Weill as having "brought fresh thinking and strategic insights to the private bank business," is boosting efforts to target customers with $5 million to $10 million in investible assets, a level that is slightly higher than the company has targeted recently..
"Our capabilities become more valuable to clients as they reach that $10 million hurdle," Mr. Scaturro said, noting that the qualifying threshold remains $3 million for new customers. Right now the bank's average private banking account is $5.5 million, he said.
Mr. Scaturro has also been building a family office group within the bank to serve families with $100 million or more of assets. The group, to be officially launched later this year, will house Citigroup's existing family advisory practice, run by Peter White, who worked with Mr. Scaturro as a consultant at Bankers Trust.
The family advisory practice is Citigroup's "way of working with families on issues that confront them that are not necessarily financial-engineering things," Mr. Scaturro said.
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